Biden revokes Keystone XL permit in blow to Canada's oil sector
Published Wednesday, January 20, 2021 6:11PM EST
CALGARY -- U.S. President Joe Biden on Wednesday formally revoked the permit needed to build the Keystone XL oil pipeline (KXL), dashing Ottawa's hopes of salvaging the $8 billion project that the struggling Canadian crude sector has long supported.
The move represents another set-back for the beleaguered Canadian energy industry, kills thousands of jobs and marks an early bump in Biden's relationship with Canada, a key trading partner. Biden had long promised to scrap the permit.
Kirsten Hillman, Canada's ambassador to Washington, told CTV that Ottawa was "very disappointed." Foreign Minister Marc Garneau, speaking minutes earlier, took a more muted tone, telling CTV that Canada respected and understood the decision.
Keystone XL, owned by TC Energy Corp, is already under construction in Canada, and would carry 830,000 barrels per day of Alberta oil sands crude to Nebraska. Opposition from U.S. landowners, Native American tribes and environmentalists has delayed the project for the past 12 years.
Former Republican President Donald Trump revived the project, but it still faced ongoing legal challenges.
TC Energy, in a statement issued before the revocation, expressed disappointment with a move it said would overturn a regulatory process that had lasted more than a decade.
The Calgary-based company said it will suspend construction and warned there could be a "substantive" predominantly non-cash, after-tax charge to earnings in the first quarter of 2021. TC Energy said the decision would lead to layoffs for thousands of unionized construction workers.
TC Energy stock closed down 1.2% at C$55.92 in Toronto while the benchmark Canadian share index edged up 0.3%
"Killing 10,000 jobs and taking $2.2 billion in payroll out of workers' pockets is not what Americans need or want right now," Association of Oil Pipe Lines Chief Executive Andy Black said.
Canada, the world's fourth-largest crude producer, ships most of that output to U.S. refineries. In 2019, the U.S. brought in 3.8 million bpd from Canada, more than half its daily imports of 6.8 million bpd.
Canadian producers, who have struggled for years from low prices partly related to sometimes-congested pipelines, have long supported KXL.
Producer Suncor Energy said it backed expanding market access to the U.S. through pipelines like KXL, which would provide responsibly sourced oil to U.S. refineries for the benefit of U.S. consumers.
But a Canada Energy Regulator report in November report said western Canadian crude exports are expected to remain below total pipeline capacity over the next 30 years if KXL and two other projects proceed, prompting environmental groups to question the need for all three.
Canadian Prime Minister Justin Trudeau said on Tuesday that Canada was pressing people at the highest levels of Biden's incoming administration to reconsider canceling the project.
Canadian Environment Minister Jonathan Wilkinson on Tuesday expressed optimism the two countries could work cooperatively in areas such as clean electricity, decarbonization of industry, transportation and methane emissions.
Alberta Premier Jason Kenney threatened legal action on Monday if Keystone XL was scrapped.